This decision announced that the common practices of nations form the foundation for this doctrine of sovereign immunity, while a given state's agreement to grant immunity in a particular case is a matter of grace, comity, and respect for the equality and independence of another sovereign country.

In the opinion of the justices at the time, this decision only upheld the United States' lack of jurisdiction over an armed ship of a foreign state in its port and was not intended for greater application. Nevertheless, that opinion came to be regarded as extending virtually absolute immunity to foreign sovereigns, which remained as rule for over 140 years. As this case made clear, however, foreign sovereign immunity is a matter of diplomatic grace on the part of the United States, not a restriction imposed by the Constitution. Accordingly, the Court consistently has deferred to the decisions of the political branches – in particular, those of the executive branch – on whether to take jurisdiction over actions against foreign sovereigns and their instrumentalities. In most cases, immunity was requested in all actions against friendly foreign sovereigns.

This practice was radically changed in 1952 when the State Department announced that it was adopting a "restrictive" principle of foreign sovereign immunity⁴. This new policy meant that: "The immunity of the sovereign is recognized with regard to sovereign or public acts (jure imperii) of a state, but not with respect to private acts (jure gestionis) [of a state]"⁵. This marked the United States' decision to join the emerging international consensus that private acts of a sovereign – commercial activities being the primary example – were not entitled to immunity.

This restrictive theory was not backed by any legislation, and hence its application proved troublesome. This was finally changed in 1976 with the enactment of the Foreign Sovereignties Immunities Act (FSIA), establishing legislative standards to determine when to exert jurisdiction over the actions of a foreign state. This act replaced the precedent of deference to the wishes of executive authority with a comprehensive legislative framework "governing claims of immunity in every civil action against a foreign state or its political subdivisions agencies, or instrumentalities."⁶

In essence, the FSIA states that foreign states are immune from the jurisdiction of both federal and state courts in the United States, subject to certain exceptions.⁷ This can be summarized insofar that under international law, states are not immune from the jurisdiction of foreign courts when commercial activities are concerned that have a "direct effect on the United States⁸", and their commercial property may be levied upon for the satisfaction of judgments rendered against them in connection with their commercial activities.

A case closely connected to this act is that of Verlinden B.V. v. Central Bank of Nigeria⁹. In it, a contract was made between the Federal Republic of Nigeria and the petitioner, a Dutch corporation, for the purchase of cement by the former. This contract was drawn up with the condition that Nigeria was to establish a confirmed letter of credit for the purchase price. Subsequently, the petitioner sued the respondent bank, an instrumentality of Nigeria, in Federal District Court alleging that certain actions by the respondent constituted an anticipatory breach of the letter of credit. The petitioner alleged the Federal District Courts had jurisdiction under the provision of the FSIA.

Another example of the use of this act is the Supreme Court case, The Republic of Argentina v Weltover Inc¹⁰. In this case, Argentina, as part of an action to stabilize its currency, issued bonds which provided for the repayment by U.S dollars through transfer on the market in New York City. Concluding that it lacked sufficient exchange to retire the bonds, Argentina unilaterally extended its time for repayment when the bonds began to mature. The bond holders, two Panamanian corporations and a Swiss Bank, declined to accept Argentina's proposed rescheduling of the payment, and took Argentina to the district court, which eventually ruled in favor of Weltover, Inc.

Argentina appealed to both the Appellant and the Supreme Court on the grounds that the district court did not have jurisdiction over the matter. The Supreme Court, however, found that the district court had jurisdiction under the Foreign Sovereign Immunities Act. Furthermore, when the case was being reviewed by the Supreme Court, Argentina argued that the "direct effect" argument was inapplicable as the plaintiffs were all foreign corporations with no other connections in this country. Yet under the precedent of Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, Argentina's position was considered to be untenable. This act gives the United States jurisdiction over another country when their actions affected the United States in a direct manner, no matter the national origin of the plaintiffs.

However, despite the fact that this law would seem to have such broad implications, it also has a very narrow jurisdiction. This can be seen in the 1989 case of the Argentine Republic v. Amerada Hess Shipping Corp¹¹. In this case, a crude oil tanker owned by respondent United Carriers Inc., a Liberian corporation, and chartered-to-respondent Amerada Hess Corp., also a Liberian corporation, was severely damaged when it was attacked in international waters by Argentine military aircraft during the war between Great Britain and Argentina over the Falkland Islands.

It was found in this case that the FSIA provides the sole basis for obtaining jurisdiction over a foreign state in the courts of the United States, and that none of the exceptions in the act under which a country's immunity could be violated were applicable.

Similarly, in Saudi Arabia v. Nelson¹², the FSIA was also found not have jurisdiction. In this case, the Nelsons, a married couple, filed this action for damages from the petitioners, the Kingdom of Saudi Arabia, a Saudi hospital, and the hospital's purchasing agent in the United States. They alleged, among other things, that Mr. Nelson had suffered personal injuries as a result of the Saudi Government's unlawful detention and torture of him, and the petitioners' negligent failure to warn him of the possibility of severe retaliatory action if he attempted to report on-the-job hazards.

The Nelsons asserted that the United States legal system had jurisdiction under the FSIA. However, the Supreme Court ruled that the Nelsons' action was not "based upon a commercial activity" within the meaning of the first clause of the act. Thus, although the introduction of the FSIA was a turning point in the United States' position on the sovereignty of States, it was an act limited in application by its own specific clauses.

Although the FSIA plays an important role in United States' policy on absolute sovereignty, it is only one of many laws that have influence in this area. One such law is the International Emergency Economic Powers Act (IEEPA), which has been repeatedly invoked by the President to control the actions of foreign countries.

A prime example is the case of Dames and More v. Regan 453 U.S. 654 (1981). In reaction to the seizure of the U.S. embassy and American nationals in Iran, President Jimmy Carter invoked the International Emergency Economic Powers Act (IEEPA) and froze Iranian Assets in the United States.

When the hostages were released in 1981, an independent claims tribunal was created, and Dames and More attempted to claim 3 million dollars, unsuccessfully contesting that the executive orders were beyond the scope of presidential power. This same act has been used by other presidents: For example, in 1990, President George Bush used it to block Iraqi government property and prohibiting transactions with Iraq, and in 1993, President Bill Clinton used the powers of the act to enforce sanctions against the Yugoslav republics of Serbia and Montenegro.

There has also been a recent push to extend the jurisdiction of the United States' legal system into the international realm. Just recently the House of Representatives has been debating a bill which would ensure that the commercial activities of the People's Liberation Army of China or any Communist Chinese military company in the United States are monitored and subject to the authorities under the International Emergency Powers Act¹³.

Similarly, Congress has been debating the International Anti-Corruption Act of 1997¹⁴. This act provides that foreign countries receiving assistance must be conducive to United States business interests – e.g. market principles, elimination of corrupt trade actives by private persons and government officials, and clear movement towards integration into the world economy. Countries which are considered not conducive to such interests could then be subject to probationary periods and a cessation of aid.

Although there are some exceptions made for humanitarian needs, the implications of this bill are enormous. The requirement that a country meet certain economic standards in exchange for U.S. aid signifies that the sovereignty of a country is being ignored in exchange to better conditions for American businesses. In proposing the bill, Senator Campbell addressed President Clinton, saying that he had received "complaints from companies when encountering illegal or unfair illegal business practices in their countries."¹⁵ The Senator concluded:

Not unlike the FSIA, this act is attempts to weave into the international legal framework a basis for the infringement of sovereignty when commercial interests are at stake.

In addition, across the international realm, there is a clear movement towards the increasing role of international tribunals and courts. The World Trade Organization (WTO) has only recently been expanded so that it may hear, try and resolve trade disputes in its Dispute Settlement Body (DSB).

On March 25, 1995, Venezuela, having first engaged in unsuccessful "consultations" with the United States, filed a formal request with the DSB to establish a panel to examine whether the United States had violated GATT by virtue of its promulgation of certain regulations setting forth "Standards for Reformulated and Conventional Gasoline"¹⁵.

On May 19, 1995, Brazil, also having engaged in such consultations, filed a similar request. The European Union and Norway also joined in the proceedings as third parties, in accordance with the WTO's procedures. The World Trade Organization ruled that the United States discriminated against foreign oil refiners and ordered that the United States develop a plan to change its rules on imported gasoline or face unspecified sanctions.

The United States has also taken trade complaints to the WTO Dispute Settlement Body. Examples include complaints against Indonesia, Australia and Argentina as well as Japan, Germany and Brazil, taken under the Super 301 law which has become a conduit for complaints to the WTO.

Another organization which has exerted its influence across the boundaries of states is the International Court of Justice. Its best-known case is that of Bosnia Herzegovina v. Yugoslavia in which the court was called to establish the if the genocide convention had been violated.

In addition, there is now the unique legal framework of the European Union, wherein sovereign states voluntarily subject themselves to a transnational authority.

There has been some debate as to if such transnational bodies have any meaningful influence over sovereign states. The answer would seem to be "yes," as there has been general compliance with the rulings of these courts. The United States was forced to comply with the WTO ruling on its gasoline sanctions, and Japan immediately agreed to partially open its auto and fire insurance markets to foreign companies after a complaint was issued by the United States.